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A win for doctors, a loss for a Senator, and Southwest goes to Congress
Plus: An update on our neighbors to the north
Good morning and happy Friday. It is February 10th and this is the Friday Pulse Check from FLATLINING and Fulcrum Strategies.
There is a lot to talk about in the healthcare world this week. President Biden (quite literally) created an uproar on Tuesday night when he claimed some Republicans wanted to cut Social Security and Medicare in exchange for lowering the debt ceiling. The one Republican who has proposed something remotely close to that went on CNN This Morning on Thursday to try and defend it. It was not a good interview for the Senator, more on that below. Plus, there is was a significant update in the Texas Medical Association’s lawsuit against HHS regarding the No Surprises Act.
In the news:
“We ain’t gonna get it.”
Senator Bernie Sanders (I-VT) said that in an interview this week with Kaiser Health News when asked what he wants to accomplish as the Chairman of the Health, Education, Labor, and Pensions (HELP) Committee and expressed his disappointment that his solution to healthcare reform isn’t going to happen in the short-term. His solution, of course, is Medicare for All and he acknowledged that the Republican-controlled House will never let that happen. He was also asked about prescription drug prices, ending the COVID-19 public health emergency, and increasing hospital staffing. Read more in Kaiser Health News.
340B changes in NY threaten hospital revenues
The 340B Drug Pricing Program was created in 1992 and allows organizations serving high populations of low-income patients on Medicaid to get a discount on outpatient prescriptions equal to what the federal government pays. Providers in the program then bill commercial payers at the regular rate, reinvesting the difference. New York is adjusting how their program works and some hospitals are warning they will lose millions of dollars. The change takes much of the savings away from the hospitals and keeps it with the state. Evergreen Health in Buffalo said they could lose $13,000,000. The change goes into effect on 1 April. Read more in Buffalo Business First. 🔒
Canadian federal government to increase spending on healthcare
I am a big fan of traveling to Canada; I went to four different Canadian provinces last year. It’s inexpensive to visit and the quality of life is generally pretty good. I am also realistic in understanding that living there can be a different story. Most Canadians fall in an income tax bracket between 15 and 25% and in Ontario, the province tacks on an additional 5 to 11% (in Nova Scotia it is 8% to 21%). Much of that income tax pays for their single-payor health system, known there as medicare. As Ron and I have discussed on the podcast before, debates have raged within the provinces about how much private healthcare should be involved in the single-payor system; in Canada, that means how many privately owned clinics and hospitals should work alongside the state-owned facilities. This week, Prime Minister Justin Trudeau proposed a CAD$196,000,000,000 increase for the healthcare system over the next decade. Since the provinces have control over how healthcare is done in their communities, the Premiers have to agree to Ottawa’s proposal. They were supposed to deliberate today, but apparently, that meeting has been pushed back to Monday after saying last week that the most of the money in the Prime Minister’s proposal was already earmarked for healthcare and only $46 billion of it is an increase. Read more in CBC News.
As of this publishing: CAD$196,000,000,000 = USD$146,960,000,000
In 2019, the US federal government spent $724 billion on Medicare and Veterans Affairs healthcare. In 2019, the estimated expenditures for the Canadian federal government was USD$168 billion. Our per capita healthcare spending was just over $10,000 and in Canada it was $4,812.
As for wait times, the median time between seeing a primary care doctor and a specialist was 10.2 weeks in Canada (26.6 in New Brunswick and 6.7 in Ontario) and in the United States, it was 2 weeks.
Other articles of interest:
Updates on the No Surprises Act
As Ron reported on Tuesday and we discussed on the FLATLINING Podcast on Wednesday, there has been a ruling in one of the lawsuits against the Department of Health and Human Services’ revisions of the No Surprises Act.
Judge Jeremey Kernodle sided with the Texas Medical Association this week and said that HHS’ August 2022 Final Rule must be thrown out for many of the same reasons he said the agency’s September 2021 Interim Final Rule must be thrown out.
HHS did not follow the proper rule-making procedure in both instances and the judge said their new Final Rule was a slightly rewritten version of the Interim Final Rule which he ruled violated the law itself.
He said this week, “the act is unambiguous” and “it is a core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”
HHS has been trying to change the way arbiters in the dispute resolution process use numbers by giving more weight to the Qualifying Payment Amount (QPA). The QPA is the median contracted rate for a particular code across all of a payor’s contracts. Though that number is supposed to be available publicly, none of the payors have complied with that part of the law and we have seen anecdotal evidence that the payors submit different numbers for the QPA for the same service.
During his State of the Union Address, President Biden praised the bipartisan effort to end surprise billing.
The ruling this week is a win for doctors and we hope to have similar rules on the other lawsuits later this month.
You can read in more detail about this week’s developments here or listen to this week’s episode of the FLATLINING Podcast.
The State of the Union
I won’t spend too much time on President Biden’s State of the Union Address since I wrote a summary of it on Wednesday. You can read it here. I did want to follow up on the claim about Republicans wanting to cut Social Security and (more importantly to us at FLATLINING) Medicare.
As I wrote on Wednesday, the only Senator who has made a platform about sunsetting Social Security and Medicare is Rick Scott (R-FL). He published a proposal that says “all federal legislation sunsets in 5 years. If a law is worth keeping, Congress can pass it again.” He went on CNN This Morning on Thursday to defend his proposal claiming that no one actually believes he was talking about Social Security and Medicare.
Kaitlan Collins, the CNN anchor interviewing the Senator, repeatedly asked him how the entitlement programs, which are part of federal legislation could be excluded from his statement. He said he was clear that he wasn’t going to cut Social Security and Medicare. Except, he isn’t clear on that; he’s clear that “all federal legislation sunsets in 5 years” and if its good it can be re-upped.
Ms. Collins asked him again. He flailingly responded that President Biden is actually the one who has cut Medicare. Ms. Collins asked how and he said that it is part of the Medicare drug price negotiation provision in the Inflation Reduction Act.
To be clear, I’ve made known that I’m skeptical of the “negotiation” aspect of that act; it will probably work more like price fixing since it is not really possible to truly negotiate with the federal government.
That being said, that isn’t a cut to Medicare benefits. One could make a sound argument that it could reduce the number of drugs created because the revenue decrease would be taken from the drug companies’ research and development teams, but that isn’t a cut to Medicare.
I’m not sure what Senator Rick Scott’s deal is here. He has been pushing back on establishment Republicans for years (including taking out television ads here in Michigan against Minority Leader Mitch McConnell), but now that some of his strange policy proposals are in the national spotlight, he seems to be like a fish out of water. He is the reason the President said “some Republicans” want to cut Medicare in front of twenty million Americans. That is not a good look for them and because of it, they won’t be rushing to Senator Scott’s aid anytime soon.
Last weekend, a report by the World Health Organization sparked a row between the United States and Russia over its coverage of the destruction of civilian healthcare facilities in Ukraine. The report only included data from the first nine months of the war. Sheba Crocker, US representative to the United Nations, said the report should have contained more recent information about attacks on civilian infrastructure. Moscow scoffed at the report, calling it politically motivated. Both the United States and Russia sit on the executive board for the World Health Organization which received the report. Read more in Reuters via Yahoo! News.
This isn’t entirely healthcare related but I wanted to share some thoughts on the Southwest Airlines (LUV 0.00%↑) hearing in the Senate Commerce, Science and Transportation Committee yesterday. Some Democrats (including President Biden in his State of the Union address) have called for more regulations over the airline industry. Among the proposals that have been mentioned is eliminating paid seat assignments (at least for families who want to sit together), cash reimbursement for delayed and canceled flights, and perhaps even going after baggage fees.
I fly a fair amount for work though I don’t fly as much as most business travelers. But I fly enough to pay attention to the happenings in the travel industries. Notably, Southwest is the only one of the Big Four carriers that hasn’t filed for Chapter 11 bankruptcy and it has also made money every year (except for 2020). Given their debacle in December 2022, their streak may be coming to an end, but that doesn’t necessarily spell doom for the airline.
The other big three (American Airlines [AAL 0.00%↑], Delta [DAL 0.00%↑], and United [UAL 0.00%↑]) have filed for bankruptcy and they still exist and dominate because they have survived by merging with or buying out other airlines. Delta and Northwest Airlines merged in 2008 after they both filed for bankruptcy in 2005. Their merger made Delta the largest airline in the world.
American Airlines merged with US Airways in 2015 making them the biggest airline in the world. American filed for bankruptcy in 2011 and exited in 2013 as American Airlines Group with a wholly owned subsidiary, American Eagle.
By 2012, United Airlines had merged with Continental Airlines. More recently, there have been proposals from Frontier and JetBlue to purchase discount carrier Spirit Airlines.
As many economists would argue, massive consolidation is not good for consumers; competition is king. Here in Metro Detroit, 80% of the flights are on Delta. Yes, their midwestern hub is here, but despite that, they are also the most expensive airline that connects Detroit to the rest of the world.
Healthcare industry watchers will remember that not too long ago Anthem, now Elevance (ELV 0.00%↑), attempted to buy Cigna (CI 0.00%↑). Anthem pulled out of the deal in 2017 after a federal judge agreed with the Department of Justice that the deal violated Section 7 of the Clayton Antitrust Act. It would have solidified Anthem/BlueCross and BlueShield's monopoly in many markets which would undoubtedly drive up costs for patients.
The difference between that proposed merger and the airline mergers is that in the case of Anthem and Cigna, neither company was at risk of going out of business. The mergers between Delta and Northwestern and between American and US Airways perhaps kept those major brands going. And, as one panelist said this week to the Senate Commerce Committee, there is more competition than ever in the US from low-cost airlines such as Spirit, Frontier, Avelo, and Breeze and that doesn’t even consider the competition from other international flag carriers or budget airlines. You don’t have a similar situation in healthcare.
Have a good weekend,